Bitcoin and Carbon Dioxide Emissions: Evidence from Daily Production Decisions

Anna Papp, Douglas Almond and Shuang Zhang

No 31745, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Environmental externalities from cryptomining may be large, but have not been linked causally to mining incentives. We exploit daily variation in Bitcoin price as a natural experiment for an 86 megawatt coal-fired power plant with on-site cryptomining. We find that carbon emissions respond swiftly to mining incentives, with price elasticities of 0.69-0.71 in the short-run and 0.33-0.40 in the longer run. A $1 increase in Bitcoin price leads to $3.11-$6.79 in external damages from carbon emissions alone, well exceeding cryptomining’s value added (using a $190 social cost of carbon, but ignoring increased local air pollution). As cryptomining requires ever more computing power to mine a given number of blocks, our study highlights both the revitalization of US fossil assets and the potential value of financial industry accounting standards that incorporate cryptomining externalities.

JEL-codes: Q40 Q58 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-pay
Note: EEE
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Citations: View citations in EconPapers (2)

Published as Anna Papp & Douglas Almond & Shuang Zhang, 2023. "Bitcoin and carbon dioxide emissions: Evidence from daily production decisions," Journal of Public Economics, vol 227.

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